A token is a digital asset created with a smart contractSmart contractA program that runs on a blockchain and automatically carries out what it was written to do once certain conditions are met. on a blockchain that already exists. The difference between a token and a coin is this: a coin such as bitcoin or ether is built into its own network, while a token sits on top of another coin's network. Many of the best-known tokens live on EthereumEthereumAn open blockchain that can run applications and smart contracts, with its own cryptocurrency called ether (ETH)..
Examples of tokens
- Stablecoins such as USDC, which aim to track the US dollar.
- Tokens tied to a service or project, such as LINK from Chainlink.
- Memecoins such as Shiba Inu (SHIB).
- NFTsNFT (non-fungible token)A unique token on a blockchain that records who owns a specific item, such as a piece of digital art, a ticket or an item in a game., tokens where each one is unique and different from the rest.
How does a token work?
On Ethereum, most tokens follow the ERC-20ERC-20A standard for tokens on the Ethereum network that lets every wallet and service receive and send them in the same way. standard, proposed in 2015. The standard means wallets and services can all handle the tokens in the same way. The smart contract keeps track of who owns how many tokens, much like a company's share register.
When you send a token, you pay the network fee in the network's own coin, not in the token. So to send USDC on Ethereum, you also need a little ether.
What to keep in mind
Anyone can create a token in a few minutes for very little money. Many tokens are worth little or nothing, and some are outright scams. The same token can also exist on more than one network, so always check which network you are sending and receiving on.
Everything in Myntkaup Learn is written and regularly reviewed by the Myntkaup editorial team. It is for education and is not investment advice. Editorial policy. Updated 18 October 2026.